Learn Forex Currency Pairs

The US Dollar is the most frequently traded currency in the world. As a result, most currencies are quoted against it. However, different types of currency pairs are used when referring to Forex trading, each of which is split into groups depending on the amount of trading activity and liquidity. These are known as majors, minors (or crosses), and exotic pairs.

Major currency pairs

The most traded currency pairs in the world are called the majors. They are generally the most liquid and attractive to all types of Forex traders. The EURUSD is the most traded pair, representing nearly 30% of all daily Forex trades on the entire Forex market.

Currencies not classed as major currencies but are normally traded against a major currency are called minor currencies and crosses.

Minor currency pairs and crosses

Currency pairs that do not contain the US Dollar are known as ‘crosses’. A currency pair involving a major non-US Dollar currency would also be known as a ‘minor currency pair’.

The most common crosses are pairs derived from the three major non-US Dollar currencies – Euro, Great British Pound, and Japanese Yen. For example, pairs that involve the euro are called ‘euro crosses’. Below is a list of Euro, Pound, Yen, and other crosses.

EURO CROSSES

GBP CROSSES

YEN CROSSES

OTHER CROSSES

Exotic currency pairs

Trading exotic pairs offer exposure to a wide range of developing and emerging market economies across Asia, the Middle East, and Africa. In general, exotic pairs are not traded as often as majors or crosses, which means they are not very liquid markets and lack consistent market activity.

There are often pros and cons associated with trading exotic currency pairs. Because they are not so widely traded, they can often be subject to higher trading fees; however, when the market moves, they can be subject to wild price fluctuations (suitable for the more experienced trader).

Below is a list of some of the main currency pairs referred to when talking about exotic pairs.

Nicknames

In Forex, many currency pairs (especially the majors) have particular nicknames which are commonly used in the market. Many even have an exciting story about why they were nicknamed that in the first place. For example, the FX pair GBPUSD is called ‘cable’.

This dates back to the 19th century when a communications cable ran across the Atlantic Ocean floor to get the exchange rate between the US Dollar and the British Pound.

In some cases, the currency by itself is known by a different name. For example, the US Dollar is often referred to as the ‘greenback’, while you may hear the British Pound referred to as ‘sterling’.

Below is a list of the most popular currency pair nicknames.

CURRENCY PAIR NICKNAME

Currency codes

Currencies are often abbreviated to a three-letter currency code. The first two letters symbolize the country’s name, while the third is the country’s currency.

Let’s look at a few examples.

GBP – ‘GB’ stands for Great Britain, while the ‘P’ stands for Pound

USD – ‘US’ stands for the United States, the ‘D’ stands for Dollar

JPY – ‘JP’ stands for Japan, the ‘Y’ stands for Yen

In trading, you will hear a lot about ‘pips’ and ‘spreads’. Learn about pips in Forex and how different factors can influence spreads.

FAQ

Q: What are major currency pairs?

A: Major currency pairs are the most traded pairs in the forex market, involving the US dollar and other major currencies like the Euro, Yen, and Pound.

Q: How do I read a currency pair?

A: A currency pair is quoted with a bid and ask price. The first currency is the base, and the second is the quote. The value indicates how much of the quote currency is needed to purchase one unit of the base currency.

Q: What factors influence currency pair movements?

A: Factors include economic data, geopolitical events, interest rates, and market sentiment.

Q: What are exotic currency pairs?

A: Exotic pairs consist of one major currency and one from an emerging or smaller economy, like USD/TRY or USD/ZAR.

Q: How can I start trading currency pairs?

A: Begin by opening a demo account with VT Markets to practice trading and develop your strategy.

Ready to master currency pairs? Open a demo account with VT Markets today and practice trading with virtual funds. Join VT Markets and take the first step towards becoming a skilled forex trader!

Why Trade Forex

(In comparison to other markets)

The forex market is the world’s largest, and it offers numerous advantages that attract traders. The following are some of the primary reasons to give forex trading a try.

Unparalleled liquidity

The foreign exchange market is highly liquid, which is another way of saying that other traders are always available to engage. However, why is liquidity so critical?

Assume you’re attempting to sell a Nokia phone manufactured in 2000. If you placed an ad on eBay asking for $1,000, you’re unlikely to receive an offer — and if you do, it’s likely to be for a few hundred dollars (at most) a month later. Essentially, there aren’t many buyers and vendors for that goods.

However, if you were to sell the current iPhone at the price you purchased, you would almost certainly receive multiple offers, most of which would be close to your asking price. This is simply due to the market’s high volume of buyers and sellers. This is a technique for proving enough liquidity.

Volatility

Another reason it is pretty popular is due to the volatility of the FX market. This is related to currency fluctuations, which are determined by the real economy of various countries. Because economic outlooks are constantly changing – due to factors such as recent news and events – the accompanying currency’s value will fluctuate. These movements provide traders with an opportunity to benefit from forex deals.

24-5

The currency market is open twenty-four hours a day, five days a week. This 24-hour trading provides traders in various world regions with numerous changes, depending on which markets are available at particular times. For instance, when trading sessions overlap – as they do during the few hours that the US and European markets are open concurrently – there can be more trading activity, resulting in new chances. The markets’ 24/5 nature also provides traders with flexibility – for example, even if you’re locked in the office all day, you may still conduct a few trades over lunch or while relaxing at home in the evening.

Trading with leverage

One of the beautiful aspects of forex is that it allows for leveraged trading. This indicates that you can use a small amount of capital to undertake a higher-value trade. In effect, leveraged trading will enable you to stretch your money further.

For instance, leverage of 1:100 means that a $1 investment may purchase $100 worth of “forex.” While leverage has the potential to help you earn more money more rapidly, it also has the potential to cause you to lose more money. Therefore, whenever you trade with leverage, proceed with prudence and trade only what you can afford to lose.

FAQ

Q: How do I start trading forex?

A: Begin by opening a demo account with VT Markets to practice. Then, move to a live account once comfortable.

Q: What is leverage in forex trading?

A: Leverage allows you to control a larger position with a smaller amount of capital. For example, 1:100 leverage means $1 controls $100 in the market.

Q: Is forex trading risky?

A: Yes, forex trading involves risk due to market volatility and leverage. It’s essential to use a well-defined strategy and proper risk management. Learn Forex with VT Markets Forex Education.

Q: Why is the forex market so liquid?

A: The forex market’s high liquidity comes from its large trading volume and continuous operation across global time zones.

Q: Can I trade forex 24 hours a day?

A: Yes, the forex market operates 24 hours a day from Monday to Friday, covering different time zones worldwide.

Ready to start trading forex? Open a demo account with VT Markets today and practice with virtual funds. Join us now and unlock the potential of the forex market!

What Does Forex Mean

Forex – often spelled FX – is an abbreviation for “Foreign Exchange.” Fundamentally, it is similar to a stock exchange in that it is a market where one can exchange multiple currencies worldwide. According to a 2019 triennial report from the Bank for International Settlements (a global bank for national central banks), the daily trading volume for Forex reached $6.6 trillion in April 2019.

What Is the Forex Market?

The foreign exchange market is where currencies are traded. Currencies are essential because they allow us to buy goods and services locally and internationally. For international trade, currencies must be exchanged.

For example:

• If you live in the United States and want to buy cheese from France, you or the company must pay in euros (EUR). This means exchanging US dollars (USD) for euros.

Imagine you’re traveling from Australia to the United States. You have AUD 1,000 to spend on your trip and visit a currency exchange to convert your Australian dollars to US dollars.

Assume the exchange rate is 1 AUD to 0.7 USD:

• For each AUD, you receive 0.7 USD.
• With AUD 1,000, you get USD 700 in exchange.

Profiting from Forex Trading

If you cancel your trip and return to exchange your USD 700 back to AUD, you might get AUD 1,100. This seems like a mistake, but it’s a profit due to currency value changes.

• In this case, you gained AUD 100.
• You spent AUD 1,000 to get USD 700 and now receive AUD 1,100 for the same USD 700.

This is a brief overview of Forex trading. It’s not just about exchanging currencies but also about profiting from value changes.

• We profited because the USD value rose against the AUD while we held it.
• This allowed us to convert our USD 700 for more AUD than initially.

How Forex Trading Works

A unique aspect of this market is the absence of a central marketplace. Instead, trading is conducted electronically over the counter (OTC), meaning transactions happen via computer networks among global traders.

• The market operates 24 hours a day, five and a half days a week, across major financial centers like Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich.
• Thus, when the US trading day ends, it begins anew in Tokyo and Hong Kong.
• The forex market can be active at any time, with constantly changing price quotes.

A Brief History of Forex

In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services. However, as we understand it today, the forex market is a relatively modern invention.

After the Bretton Woods accord began to collapse in 1971, more currencies were allowed to float freely against one another. The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services.

Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients. Still, there are also speculative opportunities for trading one currency against another for professional and individual investors.

There are two distinct features of currencies as an asset class:

• You can earn the interest rate differential between two currencies.
• You can profit from changes in the exchange rate.

An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Before the 2008 financial crisis, shorting the Japanese yen (JPY) and buying British pounds (GBP) was expected because the interest rate differential was huge. This strategy is sometimes referred to as a carry trade.

How Forex Is Traded Today

Forex trading today is conducted electronically over-the-counter (OTC) through a global network of banks, brokers, and financial institutions. This decentralized market allows traders to buy and sell currencies directly with each other, rather than through a centralized exchange. Traders access the market via trading platforms that provide real-time data and tools for analysis.

Types of Trades:

• Spot trades
• Forwards
• Futures
• Options
• Swaps

How Forex Brokers Work

Forex brokers act as intermediaries between traders and the interbank system, where currency trading takes place. They provide trading platforms that allow traders to place buy and sell orders on currency pairs. Brokers typically offer leverage, enabling traders to control larger positions with a smaller amount of capital. They earn revenue through spreads, which is the difference between the bid and ask prices, and may also charge commissions on trades.

Additionally, brokers offer various tools, resources, and customer support to assist traders in their activities.

Do Traders Earn from Forex? Is it Risky?

Yes, traders can earn from forex trading by capitalizing on fluctuations in currency exchange rates. However, forex trading is inherently risky due to the high volatility of the market. Traders can experience significant gains, but they also face the potential for substantial losses. The use of leverage can amplify both profits and losses. Successful trading requires a deep understanding of market dynamics, effective risk management strategies, and continuous learning. It’s crucial for traders to be aware of the risks and prepare accordingly.

Conclusion For What Forex Means

Understanding forex and how it operates can be a gateway to potentially lucrative trading opportunities. Whether you’re a beginner or a seasoned trader, grasping the basics of forex trading, the role of brokers, and the inherent risks is essential. Forex trading offers a unique blend of excitement and challenge, with the potential for profit alongside significant risks. VT Markets provides an excellent platform for traders at all levels to explore the forex market, offering the tools and resources needed for successful trading.

FAQ Section:

Q: What is Forex trading?

A: Forex trading involves buying and selling currencies to profit from exchange rate movements.

Q: How does the Forex market operate?

A: The Forex market operates 24/5, allowing traders to exchange currencies in a decentralized, global market.

Q: What are currency pairs?

A: Currency pairs are the two currencies involved in a trade, such as EUR/USD, representing the Euro and US Dollar.

Q: Why is Forex trading popular?

A: Forex trading is popular due to its liquidity, market hours, and potential for high returns.

Q: How can I start trading Forex?

A: Begin by opening a demo account with a reputable broker like VT Markets, practice trading, and develop a strategy.

Ready to dive into forex trading? Open a demo account with VT Markets today and practice trading with virtual funds. Join us and start your journey to becoming a proficient trader!

Dear Client：

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution date may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client：

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution date may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution data may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution data may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution data may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution data may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.

Dear Client,

Warmly reminds you that the component stocks in the stock index spot generate dividends. When dividends are distributed, VT Markets will make dividends and deductions for the clients who hold the trading products after the close of the day before the ex-dividend date.

Indices dividends will not be paid/charged as an inclusion along with the swap component. It will be executed separately through a balance statement directly to your trading account, the comment for which will be in the following format “Div & Product Name & Net Volume ”.

Please note the specific adjustments as follows:

Note: The above data is for reference only, the actual execution data may be changed, please refer to the MT4/MT5 software for details.

If you’d like more information, please don’t hesitate to contact trading@vtmarkets.com.